Exam 18: International Macroeconomics

Assume that Tom sells a crate of Florida oranges to a retailer in Canada and Susan sells a U.S. bond to a customer in Britain. Which statement illustrates the difference and/or similarity between these two transactions?

A major drawback of a floating exchange rate is the:

The Bretton Woods monetary system:

When the interest rate in the United States decreases as a result of expansionary monetary policy, investment spending _____ and consumption _____ .

When the Mexican government changes the fixed rate of pesos per U.S. dollar from 1.5 to 3.0, the peso is _____. When the equilibrium exchange rate of U.S. dollars per euro changes from 1.15 to 1.30, the euro is _____.

Scenario: Purchasing Power Parity A car costs $30,000 in the United States and the exchange rate is $1 = £0.50. The same car costs £12,000 in Britain. For there to be purchasing power parity, the nominal exchange rate for the dollar must be:

A fixed exchange rate: I. makes monetary policy less effective for domestic stabilization. II) is more expensive to maintain than a fixed exchange rate. III) reduces uncertainty in international trade.

The difference between GDP and GNP is that:

The underlying motives behind capital flows reflect international differences in:

An increase in the value of a fixed rate currency is called a revaluation.

If the United States exports $100 billion of goods and services and imports $150 billion of goods and services and there is no other factor income or transfers, the balance on the financial account is:

If the equilibrium exchange rate is above the target rate, the government should: I. buy its domestic currency in foreign exchange markets. II) engage in expansionary monetary policy. III) restrict the purchase of foreign currencies.

The 1944 Bretton Woods agreement established a system of fixed exchange rates among major currencies.

A hamburger costs $8 in the United States and ¥960 in Japan. The nominal exchange rate is ¥110 per dollar. The inflation rates in the United States and in Japan are 2% and 4%, respectively. The purchasing power parity is _____ per dollar.

If the target exchange rate of a fixed currency is above the equilibrium exchange rate, to reach the target rate, the government should sell that currency and buy foreign currencies.

When the U.S. dollar price of a foreign currency rises:

A reduction in the value of a fixed rate currency is called a depreciation.

After a revaluation, all other things equal, probably exports will increase and imports will decrease.

All other things being equal, if the economy of Europe expands rapidly and this increases tourism dramatically in the United States, the:

From early 2014 to early 2016 the dollar rose about _____% on average.